NEPAL MINERALS

NEPAL MINERALS

Because only a few minerals were available in small quantities for commercial utilization, the mineral industry's contribution to the economy was small. Most mineral commodities were used for domestic construction. The principal mineral agency was the Department of Mines and Geology. Geological surveys conducted in the past had indicated the possibility of major metallic and industrial mineral deposits, but a poor infrastructure and lack of a skilled work force inhibited further development of the mineral industry.

The most important mineral resources exploited were limestone for cement, clay, garnet, magnetite, and talc. Crude magnetite production declined from a high of approximately 63,200 tons in 1986 to approximately 28,000 tons in 1989; it was projected to decline further to 25,000 tons in 1990.

In 1990 mineral production decreased significantly, largely because of political unrest. Production of cement fell approximately 51 percent over 1989--from approximately 218,000 tons to about 107,200 tons. Production of clays for cement manufacture dropped from 7,206 tons to 824 tons. Lignite production decreased 19 percent, and talc production fell 73 percent. Ornamental marble production, however, increased in 1989--by 100 percent in cut marble and 1,560 percent in marble chips.

Nonetheless, the mining industry had the potential to become a more important part of the economy, as new mines were being planned or were being developed. Two cement plants already were in operation, and a third one was being planned. It was expected that with full production in the three plants, Nepal might become selfsufficient in cement. A magnetite mine and pressuring plant east of Kathmandu had completed its construction phase and began production of chalk powder (talcum powder) on a trial basis in 1990. A highgrade lead and zinc mine was being developed north of Kathmandu in the region of Ganesh Himal and was expected to become operational in the 1990s, although raising enough capital for the project was problematic. Production of agricultural lime in 1989 doubled that of the previous year, suggesting that progress was being made towards meeting requirements of the agricultural sector.

NATURAL RESOURCES MANAGEMENT IN NEPAL

NATURAL RESOURCES MANAGEMENT IN NEPAL

Nepal's economic development depends critically on natural resources that are fragile and being rapidly degraded. In Nepal, the links between poverty, economic incentives, institutional weaknesses in government, and the destruction of land, water resources, and forests are more starkly visible than in countries where environmental damage is not, or not yet, so severe. A new OED study analyzes the projects, policies, and institutional reforms that have affected the management of Nepal's natural resources over 25 yrs (1966-89).

The study finds that despite $4.5 billion of aid for projects affecting natural resources, Nepal still has worsening environmental problems and no effective strategy to address them. The Bank's own assistance has done little to promote better natural resource management except within the sphere of the individual projects it has financed.

Yet, as resource degradation continues, the country's scope for improving living standards diminishes. Because better resource management will require not only financial investments but changes in policy, institutions, and individual behavior, environmental concerns urgently need to be incorporated into decision making at all levels.

Development, environment

Ninety percent of Nepal's GDP and employment comes from agriculture, yet soils are very poor. The topography hampers the development of transport, communications, and a monetized economy. Population growth is 2.7 percent a year. Problems such as persistent soil erosion, high rates of sedimentation, increased flooding, and decline in water quality continue to intensify. Pressures of population and livestock on land, migration to fragile areas, and the extent of poverty are all implicated (see box). But so too are development policies and projects.

Six forms of capital participate in the development process-- human, natural, institutional, cultural, physical, and financial. Sustainable development comes from attaining a balance across the various forms of capital over space and time. In Nepal, the accumulation of physical and financial capital has been sought more aggressively than the acquisition of human and institutional capital or the conservation of natural capital. But as natural capital continues to deteriorate, the possibilities for sustainable development diminish.

Studies assessing natural resource degradation in Nepal appeared as early as 1959, but offered few suggestions for managing natural resources better. Bilateral donors were the first to develop programs in soil conservation, land management, afforestation, and livestock rationalization. Most of these programs were quite narrowly conceived and not pursued in the context of an overall understanding of causes and effects or of a broad donor/government development strategy. Nepal's early National Development Plans gave little attention to the environment and natural resources; most public investments were for roads and telecommunications. The Bank began to address environmental problems much later than Nepal's other donors and, even then, without an explicit statement of the problems.

The literature over two decades has severely criticized the way decisions were made and government policies formulated in Nepal, and how little international aid has done to bring about change. Between 1966 and 1989, donors committed more than $4.5 billion (1988 dollars) in grants and loans to Nepal for about 800 projects affecting the use of renewable resources. But much of this aid supported uncoordinated projects that duplicated or cancelled out each other's efforts. Proliferating projects and conflicting advice drained the government's managerial, technical, and financial resources. Donors noted Nepal's limited absorptive capacity but went on providing aid.